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More Willing to Limit Choice of Physicians and Hospitals in Return for Lower Out-of-Pocket Costs

WASHINGTON, DCMore Americans are willing to limit
their choice of physicians and hospitals to save on out-of-pocket medical costs,
according to a new national study by the Center for Studying Health System Change
(HSC).

Between 2001 and 2003, the proportion of working-age Americans with employer
health coverage willing to trade broad choice of providers for lower out-of-pocket
costs increased from 55 percent to 59 percentafter the rate had been stable
since 1997, the study found.

"A likely explanation for the change in consumer attitudes is that the
growing burden of out-of-pocket medical costs is prompting a reassessment of
the choice-cost trade-off," said Paul B. Ginsburg, Ph.D., president of
HSC, a nonpartisan policy research organization funded principally by The Robert
Wood Johnson Foundation.

Consumer demand for broader choice of health care providers was a driving force
behind the managed care backlash of the mid-1990s. Under pressure from employers
and consumers, health plans broadened provider networks and eased other care
restrictions, but these changes were accompanied by rapidly rising health insurance
premiums. In response, many employers in 2002 began increasing patient cost
sharing through higher deductibles, copayments and coinsurance, where patients
pay a percentage of the bill rather than a fixed-dollar amount.

The studys findings are based on HSCs Community Tracking Study Household
Survey, a nationally representative survey that asked people whether they were
strongly unwilling, somewhat unwilling, somewhat willing or strongly willing
to accept a limited choice of physicians and hospitals to save money on out-of-pocket
costs for health care. The definition of out-of-pocket costs excludes individuals
contributions toward health insurance premiums. In 2003, the survey included
20,500 adults aged 18-64 with employer-sponsored insurance, while the 2001 survey
included 28,000 working-age adults with employer coverage.

"Americans are deeply divided over the trade-off between unfettered choice
of physicians and hospitals and lowering their out-of-pocket health costs,"
said Ha T. Tu, M.P.A., an HSC health researcher and study author. "Substantial
minorities feel intensely about this hot-button issue: 20 percent were strongly
willing to limit provider choice, while 21 percent were strongly unwilling."

The studys findings are detailed in a new HSC Issue BriefMore Americans
Willing to Limit Physician-Hospital Choice for Lower Medical Costsavailable
here. Other key findings include:

Low-income consumersdefined as those with family incomes below 200
percent of the federal poverty level, or $36,800 for a family of four in 2003were
most willing to give up provider choice in return for lower costs. In both 2001
and 2003, about two-thirds of low-income people were willing to limit provider
choice, while the proportion of people with incomes above 400 percent of poverty
willing to limit choice increased from 50 percent to 54 percent.

Compared with other adults, people with chronic conditions, such as
diabetes, asthma or depression, were only slightly less willing to limit their
choice of physicians and hospitals to save on costs. Among chronically ill working-age
adults with employer coverage, 56 percent said they were willing to accept limited
choice of providers, only slightly lower than the 59 percent of all working-age
adults with employer coverage willing to limit choice.

The proportion of chronically ill working-age adults with employer
coverage willing to trade choice for lower costs rose substantially from 51
percent in 2001 to 56 percent in 2003.

At each income level, willingness by chronically ill people to give
up choice to gain cost savings has increased significantly: 5 to 6 percentage
pointsa substantial increase for a two-year period. These increases are larger
than those reported by people without chronic conditions, and one likely explanation
is that the increase in patient cost sharing has fallen most heavily on people
with chronic conditions, making them more willing to sacrifice choice to save
on costs.

Within the low-income group, people with chronic conditions are now
at least as likely as those without chronic conditions to be willing to give
up choiceabout two-thirds of both groups.

Given the diversity of choice-cost opinions, offering a variety of insurance
products representing different choice-cost options would satisfy the largest
number of consumers, according to the study. Yet, in recent years, many employers
have reduced the range of insurance options offered to their workers. At the
same time, many employers have chosen to adopt broader provider networks and
increase patient cost sharing, leaving those who are willing to trade choice
for lower costs with fewer opportunities to do so.

Whether employers provide such options in the future likely will depend on
whether they perceive enough demand for those products from their highly paid
workersoften the portion of their workforce for which recruitment and retention
concerns are greatest.

"If employers dont see the need to provide lower-cost options to satisfy
high-earning workers, then it is unlikely that these options will be offered
broadly," Tu said. "Increasingly, consumersespecially low-income
peoplewilling to limit provider choice for lower costs may find no way of satisfying
those preferences, resulting in lower take-up of employer-sponsored insurance
and an increase in uninsured Americans."

### ###

The Center for Studying Health System Change is a nonpartisan policy research
organization committed to providing objective and timely research on the nations
changing health system to help inform policy makers and contribute to better
health care policy. HSC, based in Washington, D.C., is funded principally by
The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy
Research, Inc.